Accelerated Marketing Method and real estate comps
As you know, we are invested in using the accelerated marketing method for selling real estate -- whether you are selling your home, a plot of land, or place of business. We have talked in the past about the advantages of selling by auction: you set the date, you set a minimum price, you don't have to deal with showings scheduled by a realtor at times that might are not convenient for you, you will benefit from bidding competition, your asset will sell as is with no contingencies attached to the sale, and your asset will sell (provided your minimum bid is met) the day of the auction.
What these benefits don't speak to is how your sale might be impacted by local real estate comps. Real estate comps are recently sold properties that are similar to the property you are trying to sell in terms of location, size, condition and features. Comps, an abbreviation of “comparable sales,” are used to determine a home's fair market value through the sales comparison approach to pricing property.
Comps are helpful to both buyers and sellers. When a home or property is sold by the traditional real estate process, both parties use comps to help determine the asking price for your property. Selling using the accelerated marketing method is no different. Your auctioneer will hold a real estate license or will work with a broker to assess the value of your property. Using comps, they will provide you with guidance regarding what your minimum acceptable bid will be. However, unlike the traditional real estate process where a property is put on the market based on these comps, your decision regarding a minimum bid is not always advertised. Instead, your auctioneer will work to move bidders to that price and, with the right audience and competition, beyond it.
There is one distinct advantage to using the accelerated marketing method as it relates to comps. When selling by auction, comps do not pose a potential lending problem for the buyer. In the traditional real estate method, your property might become part of an "offer war" in which two or more parties go back and forth and end up offering quite a bit more than your asking price. Often times, the buyer is willing to pay more than local comps indicate because the property is located on a particularly desirable lot, has unique construction, has been recently renovated, or has an incredible view that the buyer finds particularly desirable.
Unfortunately, in these cases once the dust has settled the mortgage provider often will not approve the increased selling price because it is too high compared to the appraiser's valuation. A valuation that was determined using local comps that don't reflect your property's unique characteristics. In these cases, buyers must use cash to make up the difference. Although some buyers have the flexibility to make up that cash difference, it is not unusual for a buyer to have to withdraw their offer. Which, as you can imagine, slows down your sale and may end up costing you the sale in that round of offers because other potential buyers have already moved on.
When selling by auction, this potential funding issue does not exist. Buyers come prepared to make good on their bid within a specified time period and they have the cash to do it. They are not dependent on comps and appraisals to make good on their offer. Just one more advantage to selling using accelerated marketing!